Comparitive study of mutual funds Essay
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Investing in mutual funds provides a total solution for the investing needs. With a well-designed portfolio of mutual funds, the investor can have his own pool of professionally managed investments, even with a small initial investment. Mutual fund is a kind of trust that manages the pool of money collected from various investors and it is managed by a team of professional fund managers (usually called an Asset Management Company) for a small fee.
An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.
Mutual funds are operated by money managers, who invest the fund’s capital and attempt to produce capital gains and income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.
The Indian Mutual fund business has passed through three phases.
The first phase was between 1964 and 1987, when the only player was the Unit Trust of India, which had a total asset of Rs. 6,700/- crores at the end of 1988. The second phase is between 1987 and 1993 during which period 8 funds were established (6 by banks and one each by LIC and GIC). The total assets under management had grown to Rs. 61,028/- crores at the end of 1994 and the number of schemes were 167.
The third phase began with the entry of private and foreign sectors in the Mutual fund industry in 1993. Kothari Pioneer Mutual fund was the first fund to be established by the private sector in association with a foreign fund. The share of the private players has risen rapidly since then. At present 39 asset management companies are working in India. The major mutual fund players in Indian market at present are: ABN AMRO Mutual Fund
I have chosen HDFC ASSET MANAGEMENT COMPANY from private sector and SBI MUTUAL FUND from public sector for my study because HDFC is no 1 in private sector mutual fund companies and SBI is no 1 in public sector mutual fund companies. HDFC Asset Management Company Limited (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on July 3, 2000.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore. SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI Mutual Fund has been constituted as a trust, sponsored by State Bank India. Today the Fund has an investor base of over 2.8 million spread over 23 schemes. With a large network of collecting branches and investor service centres, SBI Mutual Fund constantly endeavors to get closer to its growing family of investors. NEED OF THE STUDY
Mutual fund companies are introducing various new schemes in the market due to which the investors are generally confused that in what type of schemes they should invest and in which mutual fund company they should invest. The main purpose of this study is to know about the performance of various schemes of mutual fund companies of public and private sector in the market. It would help to know about the concept of mutual funds and to know about various schemes under mutual fund which will ultimately benefit the investors to decide about their investment in mutual fund companies.
OBJECTIVES OF THE STUDY
The study is being conducted for the following objectives:
To develop understanding of the concept and working of mutual fund schemes. To analyze and compare the performance of selected mutual fund schemes offered by SBI mutual fund and HDFC mutual fund. To study the investor’s behavior towards the mutual fund schemes offered by public and private sector.
The data required for the study is collected from primary as well as secondary sources. The primary data is collected through self constructed questionnaires which will be to know about the investors behavior towards mutual funds in private and public sector. SAMPLE AREA- AGRA CITY
SAMPLE SIZE- 50
SAMPLING METHOD- CONVINIENT SAMPLING
The secondary data is collected from websites.
NATURE OF STUDY
The study is analytical which includes comparative analysis of performance of mutual funds in public and private sector as well as analysis of investors behavior towards mutual funds in private and public sector. TOOLS USED FOR ANALYSIS
Financial technique such as Sharpe ratio and Standard deviation. Presentation tools
Bar graphs and pie charts
1) KHORANA AJAY (2001) “Performance Changes following Top Management Turnover: Evidence from Open-End Mutual Fund” Journal of Financial and Quantitative Analysis, September 2001 2) Sapar Rao Narayan and Madava Ravindran in his paper entitled Performance Evaluation of Indian Mutual Funds(2003) www.ssrn.com 3)Panwar Sharad and Madhumathi R. in their study entitled Characteristics and Performance Evaluation of selected Mutual funds in India(2006) Indian Institute of Capital Markets 9th Capital Markets Conference Paper 4)Ranganathan Kavitha in her study entitled A Study of Fund Selection Behaviour of Individual Investors Towards Mutual Funds – with Reference to Mumbai City (2006) Indian Institute of Capital Markets 9th